How to Get Started In Fix and Flip Real Estate
Real estate agents can make anywhere from $40,000 to $1 million dollars a year!
However, you don't have to be a licensed agent to start profiting from properties around you. Have you ever considered investing in real estate?
If yes, fix and flip real estate might be the perfect investment opportunity for you. Not only is it a lucrative way to make money, but it also has the potential to provide great tax benefits. This article will explore some of the best ways to maximize your ROI when you’re with realistic
Are you ready to learn more about how to flip houses? Read on as we go through everything from finding properties for sale, rehabbing them, and then selling like a pro!
Learn the Neighborhood
Fix and flip real estate is all about doing your research. First, you'll want to familiarize yourself with the neighborhood you're thinking about buying in. You'll want to know the history of the area, how it was when you first arrived, and what it's like now.
You'll also want to look for patterns in other homes that have sold recently. How long did they stay on the market? Were prices adjusted at different times? If so, why? Next, start researching turnover rates.
When looking for a neighborhood to flip, you want one with a high turnover rate. This means that properties are being bought and sold often.
High Turnover Rates Equal Many Potential Buyers
If there are many buyers in the area, it's likely that you'll find someone interested in purchasing your property very quickly. If not, you may be able to lower the price to attract buyers who would have otherwise passed it up.
Especially look for properties that are being bought and sold after only a few months. The longer houses stay on the market, the lower the average sales price will be. That means you'll have to negotiate with potential buyers more often, while also having to reduce your prices.
Also, consider looking for places in neighborhoods near colleges or universities. Students often need somewhere to live when they first move out of their dorms at the beginning of each school year. Families may also want to buy a home close to their college-bound student's campus so that they can visit when needed.
Next, you'll also need to know the neighborhood crime rates. There are a lot of free services online that help you research crime in specific areas.
Moving on, ask yourself what kind of renovations are needed. If you decide not to include any major updates or improvements with your project, then you may have enough money saved up to meet your financial obligations.
What Remodeling Skills Do You Have?
Moving on, you need to thoroughly assess your skill-set before you dive into a fixer-upper. For example, do you have experience remodeling houses, or will you be starting from scratch? Will you bring in a contractor or work with that of the homeowner?
Next, consider your financial situation. If you can afford it and will end up profiting from buying and flipping houses, then there should be no problem. But if you aren't sure whether to buy one for yourself or for investment purposes, you'll need to do extensive research on how profitable the latter option is before making a decision.
Do You Have Enough Money for a Down Payment?
While it's true that most loans these days require less than 20% down, you may want to make a large down payment anyway. After all, you never know what could happen during renovation. Large amounts of money can be used for more significant renovations; smaller deposits have limits on what they can cover.
If you want to buy a house for very little money down, that's cool too. Just make sure that your finances are in order and be prepared for more drastic consequences if things go wrong.
When it comes to deciding on how much money will be needed for a down payment, there are other factors besides the price of the home itself that come into play.
For instance, property taxes (not just on what you pay but also where your house is located). Next, take into account interest rates for the loan you're taking out. You'll want to shop around for the best deal on a hard money lender.
Know the 70% Rule For Flix and Flip Business
Have you heard of the 70% rule when it comes to flipping houses? The basic idea behind this concept is that you want to make sure that the after-renovation value of your home will be at least 70% greater than its pre-renovated price.
If not, then it's likely that you'll end up losing money on the renovation project. Instead of taking on a fixer-upper, you may want to look for a better deal elsewhere. Even if you say that you're willing to take risks and live with the consequences, there are no guarantees in real estate flipping. Don't gamble with your financial future, and instead wait for a more profitable opportunity.
Purchasing a Real Estate Investment
Let's say you find the perfect house, and it's selling for the right price. You already checked the neighborhood crime rates, and the other homes in this area are selling quickly. What's next? Now it's time to get into the nitty-gritty details of how you'll buy a fixer-upper house.
You need to complete your application correctly in order for the lending process to move along smoothly.
When applying for a loan, consider talking with both local and national lenders. Lenders from different states may be able to offer more benefits than those where you live.
Be aware of the seller's motivation when buying a house that needs renovations. Do they want it gone quickly? Or do they want someone who will take their time and do quality work? You'll need to know this information if you don't want the bank to foreclose on your property.
You can find a good deal on a fixer-upper by buying houses that are "bank-owned." These properties have been repossessed by the lender, and in some cases, they haven't even been offered up for sale yet.
The traditional way of buying homes is through sellers who are most likely regular people. But if you want to make your investment an easy one, bank-owned options may be the way for you.
Banks usually offer lower prices than what sellers would ask for. How can they afford to low ball house prices? Banks don't have to wait for offers from interested buyers and there are no open houses or showings involved.
Information You Need to Buy a Home
Next, you'll need to make sure you have the right documents and paperwork before you can purchase the home. For instance, you'll need personal paperwork such as your social security number and a government-issued ID.
If you don't already have a business email setup, now would be a good time to do so. Instead of proceeding with the process of buying a house through your personal email, you can streamline things with the business account.
Make sure you only use your business email for real estate-related issues. This way you'll have one account to log into for all of your lucrative real estate opportunities.
Next, gather up all the relevant information about your bank and lender. Banks will give you more flexibility with loan terms and mortgage refinancing if you've built a good business relationship.
A business account can come in handy when it comes to verifying employment, as well as signing forms that are on letterhead or headed stationary. The right paper stock is necessary if you want to show the seller that your company is serious, capable, and professional. If you're not trying to work under a company name yet, then try getting an LLC so that potential sellers know who they're dealing with.
Create a Repair Timeline
Once you own the house, it's time to get to work! To avoid taking too long, we suggest creating a house repair timeline. Your timeline should realistically layout what repairs need to happen, and when.
Include deadlines that you and your contractors can work towards. Of course, there are going to be instances where you are unable to meet the deadlines you said. However, having repair deadlines and place will help you avoid getting in over your head.
Instead of taking your time to make things perfect, you'll be able to focus on getting the job done. That's not to say that you won't do a great job making the house look new. Installing safety features, improving the aesthetic appeal, and integrity of the home should all be on your to-do list.
However, you'll want to avoid getting into detailed projects that eat up too much of your time and money. Fix and flip real estate can quickly become unprofitable if you're not on top of time management.
Study Foreclosure Timelines
Are you buying a house that's in foreclosure? If you don't get the house fixed quickly, you're setting yourself up for a big loss. Once the deadline is up, it will be time to kick out your tenant and start looking for buyers.
If you're having trouble selling or finding a buyer in time, then try lowering your asking price to make more room for negotiation. This way you'll have potential buyers working with you instead of against you.
You can also split costs when purchasing construction materials and supplies with other investors and homeowners who are also doing renovations on their properties. These types of deals can help save big money at the end of the month!
Start Making Money With Fix and Flip Real Estate
If you have the time and know-how, fix and flip real estate can be a great way to make money. However, it's not as easy as buying a foreclosed home for cheap and re-selling it quickly. You need to do your research on what neighborhoods are hot in order to buy houses that will sell at higher prices.
Start looking at potential neighborhoods today, and see what houses in that area are selling for. Ready to learn more fun tips? Explore the rest of this site!
- Fix and Flip Real Estate